What is AVAX used for?

The AVAX token has two main use cases: to pay for gas fees on the network and for staking to secure the blockchain. The Avalanche network requires a small amount of AVAX to execute transactions on the blockchain. Validators on the network are required to stake AVAX to earn staking rewards based on the amount staked, duration, uptime, and response latency.

AVAX tokenomics

The total supply of AVAX is capped at 720M tokens. Of this amount, 50% were minted at launch and sold through private and public sales. The majority of these launch tokens are locked in vesting contracts between 1-10 years). The remaining 360M are reserved for staking rewards over the following decades. The reward rate is subject to governance as token holders can adjust the rate at which max supply is reached. Similar to Bitcoin, the reward rate will decreaes over time as it approaches its 720M supply cap.

How does AVAX accrue value?

All fees paid to execute transactions on the Avalanche network are burned, reducing the supply, and increasing the AVAX token's scarcity. If network demand is strong enough and the number of AVAX burned exceeds the amount minted via staking rewards, then the asset can become deflationary. Unlike Ethereum's EIP-1559 update in which only a base fee is burned, Avalanche burns all fees across its primary network. This deflationary effect will mostly be offset in the beginning by inflationary token emissions to reward validators.